The market recovered more than half of losses in later part of the session driven by private banking & financials.
Bears maintained their grip on Dalal Street as the market saw a deep cut for the third consecutive session on Tuesday, mirroring massive losses seen globally after Dow Jones fell by more than 1,100 points in previous session.
The 30-share BSE Sensex plunged 1,274.35 points in opening trade to hit day's low of 33,482.81 and the 50-share NSE Nifty crashed 390 points to 10,276.30 but recovered more than half of losses in later part of the session, driven by private banking & financials.
The Sensex fell 561.22 points or 1.61 percent to close at 34,195.94 but managed to stay positive for 2018.
Investors have lost Rs 2.69 lakh crore of wealth amid sell-off and Rs 7.87 lakh crore in the three consecutive sessions post Budget.
The Nifty ended tad below 10,500 levels, falling 168.20 points or 1.58 percent to 10,498.30 due to correction in 45 out of 50 stocks. The index also turned negative for the current year.
The broader markets also saw sharp recovery with the Nifty Midcap index falling 1.6 percent at close against more than 5 percent loss in opening. The market breadth also improved as about four shares declined for every share rising against 13:1 in early trade.
"This sell-off in the market was long due. The only surprise could be the vigour with which some stocks are correcting," Nikhil Kamath, Co-Founder and Head of Trading, Zerodha said.
Jayant Manglik, President, Religare Broking, believes one should remain cautious with so much volatility in the market due to global sentiments (global indices and bond yields) and implementation of long-term capital gains tax (LTCG) in Union Budget.
All eyes will be on RBI monetary policy, scheduled to be held on Wednesday,where investors are expecting rates to remain unchanged, he said. "Traders are advised to hedge their positions while investors can continue to accumulate quality stocks on dips for long term horizon."
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, feels this is not the time to make aggressive purchases in the market, but this is the right time to churn the portfolio in favour of quality stocks. Investors should not panic and stop SIPs, he advises.
Global markets shattered after the Dow Jones shed 1,175 points in previous session on concerns rising inflation. Asian indexes closed sharply lower, with the Japan's Nikkei, China's Shanghai Composite, Hong Kong's Hang Seng and Australia's ASX 200 falling 3-5 percent. European markets trimmed losses but were still down nearly 2 percent at the time of writing this article.
"Spike in interest rates in the US and inflation concerns led to initial sell-off, which got accentuated by over-bought positions. Contagion has spread to other asset classes (Bitcoins, base metals, crude etc.) and most emerging markets which is usually the case," Hemang Jani, Head - Advisory, Sharekhan said.
All sectoral indices closed in the red. Nifty IT index hit hard, falling 3 percent followed by Bank, Auto, FMCG, Metal, Pharma and Realty which lost 1-2 percent.
Tata Motors (down 5.14 percent) and Lupin (down 5.68 percent) were biggest losers among Nifty 50 stocks, after disappointing quarterly earnings.
TCS, Infosys, HDFC, ITC, HDFC Bank, Reliance Industries, IOC, SBI, HCL Technologies and Tech Mahindra among others were down 1-4 percent whereas Bajaj Finance rallied 3.6 percent followed by ICICI Bank, Eicher Motors and Indiabulls Housing which ended with mild gains.
Vakrangee fell by 10 percent, taking total losses for 7 consecutive sessions to more than 60 percent.Just Dial, IDBI Bank, United Breweries, Reliance Capital, Torrent Power, HDIL, Thermax, Glenmark and Adani Power were down 3-6 percent whereas Oil India, Mindtree, GSPL, Ramco Cements, Emami, M&M Financial, Havells India, Marico and Jubilant Foodworks gained 1-4 percent.